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Airbus promises to limit development risks

Airbus President and Chief Executive Officer Fabrice Bregier drinks water as he delivers a speech at the Global Management Forum in Tokyo Oc
Airbus President and Chief Executive Officer Fabrice Bregier drinks water as he delivers a speech at the Global Management Forum in Tokyo Oc

By Tim Hepher

PARIS (Reuters) - European aerospace group EADS pledged to shun risky investments and new aircraft programs for at least a decade as it promised investors a smoother ride under its Airbus brand in the wake of earlier development problems.

The head of its Airbus planemaking division, Fabrice Bregier, said it had stabilized production problems on the Airbus A380 superjumbo and the A400M military airlifter which had caused the company significant headaches in recent years.

He also told investors that flight testing and development of its latest aircraft, the A350, were progressing well ahead of the first delivery planned in the fourth quarter of 2014.

"We are on track. You know the risks, but the risks are reducing," Bregier told an investor forum in London, monitored by webcast.

After it delivers its first all-new passenger jet in a decade, Airbus will focus on enhancements to existing models.

It has already announced that from January, EADS will be called Airbus Group and the name will become official following its next shareholder meeting in May.

It reflects efforts to refocus the company on booming civil aerospace markets, but after a series of product developments it is addressing this through derivatives rather than new jets.

"Nobody sees brand-new developments in the next 10 years or even more," Bregier said.

"The focus is on the improvement of our (in-production) series programs and there is still a lot to be extracted from them. The good news for you is that it is much less risky to improve existing platforms than develop brand-new aircraft".

He did not say what impact this would have on research spending, but said the company would pursue new technology.

PRODUCTION HINT

Airbus has scored successes with a revamped version of its best-selling passenger plane, the A320neo, due to enter service in 2015, and has announced modifications to its A330 aircraft.

Bregier said there was a greater possibility that Airbus would increase, rather than reduce, production of A320-family jets as it completes the transition to the more efficient model.

Boeing , which hit back with a significant order from Air Canada overnight, last month announced plans to increase production of its competing 737 MAX.

The models compete in the largest segment of the $100 billion annual aircraft market.

Shares in EADS extended strong gains seen on Wednesday when it announced that loss-making early deliveries of the A350 would not eat into 2015 profit targets as badly as expected, following efforts to drive risk out of the $15 billion project.

At mid-session they were up 0.5 percent at 53.12 euros, not far from a record 54.5 euros set last month.

Airbus is anxious not to repeat past mistakes in developing the A380 and A400M, both of which plunged the sector into political turmoil and severely damaged its share price.

Airbus later had to slow A380 production to fix wing problems but says it is back to normal, with 30 deliveries expected in 2014. Bregier said the aircraft would be "very close" to reaching a breakeven target in 2015.

EADS Chief Executive Tom Enders however said on Wednesday costs still need to be reduced on the A400M project, which will become part of a newly merged defense and space unit in 2014.

Analysts said risks surrounding EADS had eased after it detailed the impact of loss-making initial A350 deliveries, though Bregier stressed the A350 was not risk-free.

EADS strategy chief Marwan Lahoud, one of the architects of the company formed by a Franco-German-Spanish merger in 2000, said it would not chase growth at any cost and would avoid investing in areas where growth looked shaky or inaccessible.

The company, which is selling its Test and Services monitoring business, will carry out "active portfolio management" in coming months, he said, apparently referring to further moves to thin out non-civil assets.

Confirming a two-speed strategy as reported by Reuters on Wednesday, Lahoud said EADS targeted growth in commercial aviation while consolidating its position in defense and space.

"We will not allocate resources to areas where growth is difficult to access," Lahoud added.

(Editing by Keiron Henderson and Tom Pfeiffer)

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